Many people are too overwhelmed to complete an estate plan. The most common estate plan is to “do nothing.” There is also a preconceived notion by several people that their estate is not “large enough.” Since the IRS announced the current 2018 federal estate tax limits of $11,180,000.00 per person, based on inflation, it may seem that you might not need to have an estate plan. In California, there is no state inheritance tax. However, in California, gross assets in excess of $150,000.00 will require a probate. Probate takes a substantial period of time, costs a substantial amount of fees and costs, and puts family information in the public court system. So, if you own a piece of property in California, even if you owe a significant mortgage on it, it would save your family time and money if you were to have done estate planning. No matter the size of your estate, powers of attorney should be considered so that someone can make health care decisions for you or manage your assets for you if you were to become incapacitated. So, how can Clower Law help you? First, we will look at your unique circumstances and be with you every step of the way to determine what plan that works best for you. Typically, a complete estate plan will have all, or a combination, of the following:
- Trusts. Revocable living trusts are a good way to avoid probate. Any assets held by a trust will avoid the probate process. A trust will allow you to designate who will distribute your assets after death and will designate who is to your receive your assets after your death. In order to ensure that a trust will avoid probate and the assets will go to the proper beneficiaries, you must transfer ownership of certain assets to yourself as trustee of the trust. Clower Law will sit down with each individual and create a plan that also involves assisting the client with determining the assets that should be held by the trust and which assets will be best continued to be held by an individual. Revocable trusts are good for clients who want to maintain control of their own assets and who would want to make changes to their trust throughout their lifetime, until they pass away or become incapacitated. It allows for the most flexibility during life. They are also useful when a subtrust is included within the revocable living trust for children which allow for the control of their assets until they reach a more mature age.You also may have heard of irrevocable trusts and special needs trusts. Special needs trusts are discussed in the other portions of this website. Irrevocable trusts are those that cannot be modified, amended or terminated without beneficiaries’ permission. After the assets are transferred into the trust, the person creating the trust can no longer change the written terms of the trust and must lose control over the asset. There are plenty of strategies for wanting to use an irrevocable trust, including asset protection (including creditors and/or Medi-Cal who could pay for a long term care nursing home), avoiding capital gains taxes, avoiding estate taxes, and charitable giving. Any of these situations come with a unique set of facts and before choosing any type of trust, the client should determine the pros and cons with the attorney.
- Wills. If your assets do not warrant creating a trust, a simple will may be a good way to pass your assets to the proper people or to designate some of your wishes in writing. If your assets do warrant a trust, a pour over will should be created in order to provide for the disposition of assets if an asset were not titled in the trust at the time of your death. A common example of when a pour over will can be useful is when you have your house in a revocable living trust, but you refinance years later and as a result of the refinance, the house ends up titled in your name instead of the name of the trust. In that circumstance, the pour over will assist your family in getting the house back into the trust and ensures that the proper heirs will receive the assets.
- Financial Powers of Attorney. This document gives legal authority to designate a principal/agent/attorney-in-fact to act on your behalf for all of your business, other than for health care (see below). You can give your agent broad, ongoing powers, such as handling all of your finances. You can limit the powers your agent has to specific actions or a date range. A durable power of attorney is active even if you become incapacitated. A springing power of attorney requires doctors’ notes before the agent’s powers would become active.
- Healthcare Directives. This document allows you to choose a person who will make health care decisions for you if you are too sick to make them yourself. It will also allow you to designate what type of health care decisions you would make for yourself so that those who care for you will not have to guess what decisions they should make on your behalf. Once a person is 18 years old and have capacity to sign, he or she should have a healthcare directive.
- Documents to Assist with Funding Trust. When your family decides on creating a trust, there will be additional documents necessary, depending on the assets that need to be transferred to the trust. The most common document we will prepare is a deed to transfer your real property into the trust. We will have the deed recorded with the county where you reside. Other documents can involve transferring business interests, promissory notes, and family agreements. Unfortunately, Clower Law will not be able to transfer every single one of your assets into the trust, such as your financial accounts. As such, instructions will be given to you to assist you with the transfer of other assets into the trust.
Additionally, if you have already created your estate plan, and need revisions to your existing plan, Clower Law will be happy to assist with any changes you may have. Common examples of when clients return to us to revise their existing plans are when they want to change the people who are in charge (ie, the children are grown now and can be put in charge of the estate) or if the beneficiaries need to be changed.
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